Start

12/12/2025 - Article -

The Social Market Economy in times of upheaval Agenda for Growth and Competitiveness

Introduction

The core of the Social Market Economy is the belief that a functioning competitive system can make a major contribution both to economic efficiency and to social justice. This was stated clearly by Katherina Reiche, Federal Minister for Economic Affairs and Energy, at the Economic Policy Symposium, as she advocated for an Agenda for Growth and Competitiveness.

The global economy is rapidly restructuring. People are losing faith in multilateralism and international institutions, countries are stretching the rules for their own purposes, or ignoring them entirely. Protectionism, coupled with nationalism, has catapulted us into a world in which countries are once again using monopolies and raw materials as an instrument of power politics. This is a fundamental paradigm shift, and it is challenging our own economic system. “In view of the great challenges and the conflicts of interest, we are needing to search for guiding principles which enable us both to increase our economic dynamism and to address further objectives. Germany needs a consistent and forward-looking economic policy strategy in order to pick up speed again,” said Minister Reiche.

Germany needs to find its economic policy focus again, Germany needs growth. That is the only way that Germany can win again. More than almost any other economy, our country has outstanding companies, experienced and also young, motivated people in its workforce – with an agile SME sector, with expertise and innovative drive, and with many tech startups. “If we want to defend our prosperity and, potentially, our freedom, we need to do all we can to change direction. Even if it means a lot of hard work.” It’s about discarding ballast, taking fresh opportunities, and setting the right policy framework.

In contrast to the early years of the Social Market Economy, the focus today is not on overcoming life-threatening scarcities and building a democratic political system. Rather, it is about upholding prosperity and protecting freedom and democracy. And, of course, doing so in a very different situation – worldwide, but also within Germany.

Prof. Markus Brunnermeier and Prof. Harold James (both from Princeton University) held keynotes at the Symposium There was also a panel discussion with Prof. James, Prof. Brunnermeier, Prof. Wieland and Prof. Haucap.

Bundesministerin für Wirtschaft und Energie Katherina Reiche spricht auf der Bühne.

 

Federal Minister for Economic Affairs and Energy Katherina Reiche at the Economic Affairs Ministry’s Economic Policy Symposium

„These are times of upheaval which are fundamentally challenging our economic certainties and structures. If we are to look confidently to the future, we need to revive the principles of the Social Market Economy and display courage and responsibility as we tackle our current challenges.“

Our guidelines for a modern policy balancing the market and regulation

More scope for action and responsibility

A state which prescribes, steers and encourages behaviour everywhere not only stifles people’s motivation, but also generates red tape. In fact, a state which aims to relieve people of too many risks takes on too much – and ends up being incapable of taking action. We therefore need a return to a mindset with more commercial freedom and individual responsibility. A focus on a few instruments which are as efficient as possible.

Viable public-sector finance

The forthcoming further increase in government borrowing creates an urgent need to prioritise and to make the state more efficient.
If the state is to recover its capacity to act, it needs to concentrate on its core tasks: domestic and external security, infrastructure, education. subsidies and funding programmes
must be rigorously scrutinised.

Bessere Aufstiegschancen

We need to focus more on fairness between the generations. To do this, we need to revive the
promise of career prospects offered by the Social Market Economy. The policy environment
and the incentives must be set in such a way that younger people can carve out their
own career paths. We also need better promotion prospects for talented people and skilled
workers from other countries – both for those who are already in Germany, and for those
who can envisage a life in Germany.

Thinking economic policy and security policy together

The Social Market Economy can provide orientation for dealing with increased geopolitical risks. Liability and responsibility should be placed where the risks can be managed best. A clear division of tasks between the state and the private sector is crucial. We need synergies between our security requirements and civilian technology fields, between the military and the startup community.

More European team play

If Europe wants to survive in the global competition between systems, it has to be competitive and pro-innovation. If we press ahead with the right European projects and intensify competition within the internal market, we can strengthen our prosperity and freedom.

This leads to five supply-side fields of action:

Agenda for Growth and Competitiveness

1. Modernising government, scaling back regulation

The density of regulation needs to be pruned back, government administration modernised, and government borrowing restricted.

2. Reawakening the pleasure taken in innovation

We need to roll out policies which ensure that potential productivity gains can be rapidly realised. Experimentation clauses deliver the necessary statutory scope to trial new developments in regulatory sandboxes.

3. Energy: cutting the costs of the energy system, ensuring security of supply

Energy: cutting the costs of the energy system, ensuring security of supply

4. Improving incentives to work, reforming the welfare systems.

The labour market must become more dynamic. This will require more flexibility on the labour market and more reforms to make staying in work more attractive than (early) retirement. We need skilled workers to migrate to Germany.

5. Strategic openness: resilience from diversification and a strong internal market

We need to broaden our trade relations, establishing new trade agreements with strategic partners. Germany’s own raw material deposits need to be developed. We need a completed single market which also works for services, data and energy.

Die Büste von Ludwig Erhard steht vor dem Banner der Veranstaltung.

© BMWE/ Phototek / Kira Hofmann

10/11/2025 - Picture -

Minister for Economic Affairs Katherina Reiche hosted the first Economic Policy Symposium.

Open detail view
Platzhalter

© BMWE/ Phototek / Kira Hofmann

10/11/2025 - Picture -

The focus of the launch event was on freedom, growth and resilience.

Open detail view
Prof. Harold James redet auf der Bühne vor dem Publikum des Symposiums.

© BMWE/ Phototek / Kira Hofmann

10/11/2025 - Picture -

Prof Harold James (Princeton University) held a keynote entitled ‘Germany and Europe at a crossroads’.

Open detail view
Platzhalter

© BMWE/ Phototek / Kira Hofmann

10/11/2025 - Picture -

In her speech, Minister Reiche called for a programme of reforms that will make Germany’s economy fit for the future.

Open detail view
Prof. Markus Brunnermeier, Prof. Justus Haucap, Prof. Harold James, Prof. Volker Wieland diskutieren auf dem Podium. Moderiert wird die Diskussion von Prof. Veronika Grimm.

© BMWE/ Phototek / Kira Hofmann

10/11/2025 - Picture -

The Social Market Economy in times of upheaval:  the economic experts and policy advisors invited discussed the need for reforms.

Open detail view

Developments in economic policy since 1949

In order to continue the success of the Social Market Economy, we again need to undertake great efforts, display great courage, and take on responsibility. We are underlining this with the return of the bust of Ludwig Erhard, the first Federal Minister for Economic Affairs, to the Economic Affairs Ministry.

The Social Market Economy has brought prosperity and freedom to Germany. The “economic miracle” of the early years of the Federal Republic of Germany saw an economic development which far exceeded the population’s economic expectations. This was most fortunate – not least for the consolidation of the young West German democracy. The second success story is the economic alignment of eastern and western Germany – notwithstanding all the work that remains to be done. This also took a great deal of courage and, following the fall of the Wall 36 years ago, an enormous degree of occupational adaptability, a lot of patience in many cases, and the hard work of millions of people.

Platzhalter

Related topics